2019 TMT Outlook: Another Year of Unknowns
The UK TMT sector won’t be spared the implications of Brexit—finding its own regulatory path that aligns with the European requirements will be key.
Away from the regulatory agenda, 5G will likely be a driving force of change in 2019.
2019 will be a year of change in terms of the UK telecommunications, media, and technology (TMT) regulatory agenda. The revised European Electronic Communication Code (EECC) was agreed in November 2018 and formally adopted in December 2018; member states now have two years to incorporate it into national law. The current telecommunications regulatory framework was last revised in 2009, so the new EECC has introduced significant changes, particularly around deregulation. Notably, the EECC establishes limited regulation on wholesale-only access. This mandates that regulation can be imposed on significant market power (SMP) operators only where necessary to address retail market failures, in order to avoid unnecessary overregulation in the absence of consumer harm.
In parallel, Ofcom will begin arguably its most significant market review process ever, which will encompass a review of both the business and residential markets recognising that operators now offer a range of services on combined fibre networks. It will further build on the progress of the “fibre to the home” (FTTH) initiative by the UK government and the regulator’s own efforts to promote more fibre installation.
However, the lack of clarity around Brexit will continue to cloud the UK’s ability to plan for the coming year. For example, significant questions remain over the requirement for the UK to transpose the new EECC during any Brexit transition phase. Regardless of the outcome of negotiations, it is widely anticipated that Ofcom will have no real influence over European telecommunications policy post-Brexit, including in the Body of European Regulators for Electronic Communications (BEREC), whose role is expected to strengthen with the launch of the new directive.
And with uncertainty comes risk. Should the UK’s regulatory regime diverge from that of the EU, the UK may become a less-attractive investment destination. This may compromise the UK government’s ambitions for expanding FTTH, which relies heavily on a pro-investment regime. Of course, the UK may choose to replicate the EU’s regulatory framework, which has been done by other non-EU jurisdictions, such as Switzerland and a number of Gulf states. And if the UK decides to design its own distinct regulatory structure, it might be beneficial to align it with the EU’s approach to enable cross-border trade to be as frictionless as possible.
Away from Brexit and the regulatory agenda, the progress of 5G will likely be another defining trend over the next twelve months. 5G gained movement over the course of 2018, with the first commercialised 5G networks launched in countries including Qatar, UAE, Saudi Arabia, Finland, and the US. Currently, there are only fixed wireless modems, although 5G handsets are expected in the first half of 2019.
Significant advances are expected in this space in the forthcoming year. The launch of new handsets likely will lead to an increase in spectrum of availability. Specifically, it is anticipated that the 700MHz spectrum will begin to gain ground, paving the way for wider 5G coverage as higher frequencies allow for greater network capacity.
Whether 5G will live up to its hype remains to be seen. There is a reasonable chance that it might disappoint, as was the case with 4G networks, which have the potential to deliver up to 1Gbps but rarely exceed 100Mbps in practice. So, while 5G is theoretically capable of delivering up to 10Gbps, true speeds will likely be lower. What is more, the ability to deliver these speeds will decrease as more users join 5G networks.
5G’s capabilities to facilitate a wide range of innovative services, such as those underpinned by the Internet of Things (IoT), have long been touted as game-changing. A 5G network can be divided into several virtual networks known as “slices.” Each slice will effectively operate as a different network and can be modified to suit the use case for each different network. However, the commercial case for 5G, as well as the commercial model for these new services, has yet to be developed.
4G networks have delivered an improved capacity and speed in comparison to 3G networks, but they did not result in a notable increase in mobile prices. And with operators still paying for their 4G investments, we are yet to see if 5G will become a commercial success. 2019 may provide a good indication with regard to 5G’s commercial viability.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.